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Background: The CISCO Day Trading 'Triple' Engine (tm)

December 22, 2009

©CISCO Futures

Introduction and Early Background of DTE

The CISCO DayTradingEngine (DTE) uses market generated Pause Alerts to identify intra-day trading opportunities. These opportunities are defined by two sorts of data: timing from Pause Alert balances and longer term directional (from the previous days' reference points). Another (very current) (intra-day) directionality cue comes from the Pause Alert track of last prices (the 'M' last price location in the Pause Alert time bars). Keep in mind that the Pause Alert process is all about finding the balance point for timing and the market flow direction. These two market elements (timing and direction) come directly from the market, unlike artificial calculations and presentations (charts, point figure, 1 minute bars, oscillators, fibonacci and the like).

The market's natural run and pause rhythm is innate. This rhythm itself is complex, self correcting and dependent on feedback. The run and pause character is rather fractalish, showing the same general characteristics in various timeframes. Swing traders are interested in longer timeframes (multiple days). Day Traders use multiple timeframes within a day. It should come as no surprise that there are more or less trading points depending on the time-bars used to locate the Pauses, e.g.30 minute time-bars (the standard Meta-Profile) will find less opportunities than 15 minute bars, and 5 minute bars will have more action than the 15 minute bars, etc. Pause Alert analyses allows the trader to select the time frame and hence the desired activity level; the relative number of trades within a day.

A Pause Alert is a 'hard' market descriptor: A Pause is visible. We make it more visible by coloring it green. This is the green area on the DayTradingEngine display or on the CMaPS Meta-Profile 30 minute bars. The predicted flow direction is 'soft', being derived from interpreting sixteen reference points for their flow content. Since predicted flow comes from analyzing the previous two day's reference points and assumes continuation, the prediction will be wrong when there is a directional market change, say overnight. Limited testing has shown the predictions to be correct about 80 percent of the time. From a trader's standpoint, some of the wrong predictions will not cost any losses because market directional prediction that changed overnight will be obvious when the trader goes to work (at say, 6 AM). If the market is in a balance (3, 5, 10 days), then the market is non-directional until a breakout occurs. At breakout, the direction is obvious and the breakout trader goes with it.

In net, the standard CISCO DayTradingEngine can be fairly said to offer trade timing and market direction, the two variables vital to any day trading set-up.

The above information is discussed in more detail in the link:
Day Trading Engine Background

You need to understand the above link to be able to use the information in the new, "Triple Display" format below.

This article discusses an advance in the presentation of CISCO DayTradingEngine data. The original engine presents unique information on a single future and timeframe. It can be quite useful for a trader to view multiple timeframes of the same or different deliveries. This new methodology, "The Triple", permits up to three deliveries/timeframes on one screen. The Triple display is flexible. Up to three different timeframes of one market can be viewed simultaneously, or three different markets can be tracked at the same time; or the trader can 'mix and match' as desired.

Triple expands the single one-screen system of a trader with one PC into an effective three screen system. The obvious advantage is a substantial increase of trading information in the timeframes of critical interest to the daytrader. A big plus: this expanded information comes to the trader at no additional equipment cost.

Screen Shot 1: Same Future, Three Timeframes

Use Pause/Resume to synchronize times.
Use browser 'View' command to set type size.

The logic behind using several timeframes:
Intra-day Pause Alerts will occur on most any timeframe chosen. The longer timeframes tend to have more potential (longer runs). The shorter timeframes can act as a pointer or early warning for activity in the longer timeframe.

A scalper interested in very short timeframes can use a shorter timeframe Pause Alert to trade, while the longer timeframe shows the market on a longer scale, the environment.

Screen Shot 2: Three Futures, Three Timeframes

Use browser 'View' command to set type size.

The goal is to track three related markets to find the 'outlier' or nonconforming market when it exists. Shot 2 uses eMini SP, eMini ND, and eMini DJ. Timeframe chosen is 10 minutes, but the trader could use any time from 30 minutes to a few seconds, depending on personal preference.

In this Shot, UU, NQ and YM all show a Pause Alert (green). UU and YM have a small yellow 'anticipation' below the Pause Alert. None show any outlier characteristics.

All three have been wandering down (track the M's, last price in each bar). All in all, at this point in time all three markets are at or tending toward balance (green). Preferred direction is down. One strategy is to know the Flow for each market, and if it is down to follow it with a short entry at a few ticks past the downside breakout.

Another strategy, based on correlated markets, is to line up three markets (say AB, NQ and UU) and watch for one to make a move. Typically, the other two will lag. This lag is opportunity at low risk. When this strategy works, it means several quick points for the alert day trader.

A trader can develop numerous such strategies from this data. The point is, a Pause Alert offers timing in several ways. Local directional movement is clear from the pattern of the M's, and is known from the Flow Table for the longer term for each market individually.

Use the Pause bar (center, above the delivery) to set the update time differences.

Screen Shot 3: Same Future, Same Times Offset

Sometimes, a large move can start and gain momentum in a very short time. The half-hour bars display on CMaPS will often show Pause Alerts that have a large extension (large profile potential). Some of these began their move rather quickly. These moves do not happen every day but virtually all of them start from a Pause Alert. A 5 or 10 minute display catches these moves much more quickly than the CMaPS 30 minute bars.

Since small variations in time sometimes show big variations in price, an 'offset' strategy can help catch the move early. In the display, an offset of 7 seconds for each of the three graphics can give an early warning of the start of a move. Shot 3 shows little deviation. This is the norm. The trader is waiting for a move to start in any of the three panels. Once a move is detected, a go-with trade can be placed. This uses both the timing and direction from this set-up. The trader adds the risk and trade management, elements that differ from trader to trader.